What financial aid offices need to know about legislative changes ahead

by Jeremy

The government spending package passed at the end of 2020 included several provisions to extend federal financial support to more college students.  College access advocates have long campaigned to simplify financial aid regulations and the Free Application for Federal Student Aid. They hope doing so will encourage more students to apply for aid.

According to data from the National College Attainment Network, only about 60% of high school seniors complete a FAFSA. So far this year, those numbers are down almost 10% overall, and more so for students from historically underrepresented groups, NCAN found.

Many of the changes advocates have pushed for are now written into law through the spending package and will take effect for the 2023-24 school year. Financial aid experts say offices should start examining the policies to determine how they will affect their students and award processes.

The new policies have promising potential for the long term, said Helen Faith, director of the Office of Student Financial Aid at the University of Wisconsin-Madison.

“The changes to the financial aid application process will open doors that were previously closed or seemed inaccessible to some students,” Faith said, adding that they “represent a net positive for our national economy and security as we provide pathways to education and economic stability for populations that were previously excluded.”

A look at the changes and their impact

The sweeping changes fall into four main categories, and each one is expected to impact students and their families—a simpler FAFSA. The form will be much shorter and more straightforward, which is expected to encourage more students to complete it and get the aid they qualify for. In addition to reducing the number of questions by about two-thirds, the new FAFSA will not require aid applicants to find and report income data, as that information can now be automatically transferred from the applicant’s tax return information directly to the FAFSA, with applicant consent.

“Students often are intimidated by the application, and these changes will simplify the process, which should result in our institutions assisting and serving more students,” said Dena Norris, associate vice chancellor of student financial services at Metropolitan Community College in Kansas City, Missouri.

Expanded eligibility for Pell Grants. The new legislation lifts a ban on issuing Pell Grants to incarcerated students and students convicted of drug-related offenses.

All students from two-parent families with income below 175% and single parents below 225% of the federal poverty level should receive a maximum award. According to The Washington Post, these changes will allow an additional 1.7 million students to qualify for the top prize each year.

More predictable financial aid awards. Students and families will have a new tool they can use to estimate their eligibility quickly. It uses the simplified formula for determining aid and is based on three factors: dependency status, number of parents in the household and adjusted gross income as a percentage of the federal poverty level.

Families will be able to plug data about the three criteria into a forthcoming automated tool, which will quickly estimate the aid amount a student might receive. (One notable change: The formula will no longer consider the number of college students in the household.)

They were rebranding the EFC. Students who qualify for aid traditionally saw an Expected Family Contribution noted in their student aid package. Because the figure was not a measurement of what a family could or should pay but rather an indicator of eligibility for aid, it has been renamed the Student Aid Index. For the first time, this figure can be harmful — as low as -$1,500 — to help institutions see which students are most in need.

The SAI formula will change slightly. While more students will gain Pell Grant eligibility than will lose it under the new formula, some middle- and higher-income students could end up paying more, said Jill Dejean, a policy analyst at the National Association of Student Financial Aid Administrators.

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